Joe Granville: The Original Dave Portnoy

When it became apparent sports weren’t coming back for a while in early-March, I joked that ESPN should become a financial network until they returned.

It wasn’t Stephen A. Smith but Dave Portnoy of Barstool Sports who made the pivot to trading stocks.

This makes sense when you consider how many people there are who gamble on sports. Day-trading is a natural extension of gambling.

Portnoy and his army of day-traders have gotten plenty of press in recent weeks from the financial media. The finance industry doesn’t quite know what to do with him.

Finance is a stuffy industry so things like sarcasm or trash-talking Warren Buffett and Howard Marks doesn’t go over very well. Neither does making outlandish proclamations like “stocks only go up.”

In A League of Their Own, Tom Hanks said “There’s no crying in baseball!” The finance version of this would be “There’s no laughing on Wall Street!”

That’s exactly what Portnoy has been trying to do in a world without sports. Some people get it while others don’t seem to understand it’s a shtick.

Portnoy told Jason Zwieg at the Wall Street Journal:

We are a comedy site with no agenda, and in an increasingly humorless world we tend to piss people off. It is what it is. People who know us know our intent is always to make people laugh.

Portnoy isn’t the first entertainer to bring his talents to Wall Street. Joe Granville sold newsletters in the 1980s with stock signals and bizarre predictions but he did so with a flair rarely seen in the world of finance.

While Portnoy has been using the stock market to keep eyeballs going to Barstool Sports, Granville used entertainment to get subscribers for his newsletter.

And it worked spectacularly.

The thing that most stuck with me from researching Granville was his claim that people retain three times as much information when they’re entertained. I don’t know that this was empirically tested but it makes sense.

Here’s a passage I wrote in my latest book about Granville, the original Dave Portnoy.

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At the height of his popularity in the early 1980s, Joe Granville was bringing in over $10 million a year selling investment newsletter subscriptions. The flamboyant market prognosticator traveled around the country giving seminars to drum up business for his service which would send stock market buy and sell recommendations to his subscribers. Granville was well known for his stock market advice, but he was even more well known for his antics at these events.

At a seminar in Tucson, AZ he began walking across the pool on a hidden plank just beneath the water’s surface, telling the crowd, “And now you know!” In Atlantic City he was carried in a coffin under a shroud of ticker tape and “resurrected” himself with a martini in hand in front of the crowd. Granville would often drop his pants during speaking gigs to show the audience his boxer shorts which had stock quotes on them. Props such as puppets and clown outfits were often used along with musical instruments. These spectacles kept everyone’s attention, but the main event was his predictions about the markets.

Not only did Granville opine on the stock market, he also claimed to follow 33 different earthquake indicators. “If you knew what I knew, you couldn’t keep quiet,” he claimed while predicting Phoenix would become beachfront property at one point. The forecaster even gave an exact time, 5:31 A.M. PST to be exact, that California should expect an earthquake measuring 8 on the Richter scale to hit. This prediction was based on the alignment of Jupiter, Saturn, and Mercury of course.

But his most famous, or rather infamous, prediction came in early January of 1981. Granville sent a late-night recorded phone message to his 3,000 Early Warning subscribers to “sell everything.” The next day was the heaviest trading in the history of the New York Stock Exchange up to that point, with markets falling more than 2%. Granville would appear on the cover of the New York Times. The timing of the call couldn’t have been worse. Any of his subscribers that followed this prediction missed a face-ripping stock market rally in the early-1980s as Granville stayed bearish while markets almost doubled.

Granville’s infamous sell signal in January of 1981 is often panned because of the poor timing but the odd part about this prediction is that the most recent edition of his newsletter, sent to clients just a few days prior, told them to “buy aggressively into the market.’’ After realizing the error of his ways, Granville stated, “I will never make a serious mistake in the stock market again.” Narrator: Yes, he would.

Granville’s misses far outweighed his hits for the remainder of the decade. Mark Hulbert has been tracking the performance of investment newsletters for a number of decades. When he looked at Granville’s long-term track record of performance from market-timing calls, he found from 1980 through January 2005, Granville’s stock tips lost almost 1% a year compared to a 12% annual gain for the stock market in that time. His more aggressive recommendations lost 10% per year in that time.

Granville has had plenty of company over the years in terms of people who were so sure of their prediction systems yet were flat out wrong. Near the bottom of the brutal bear market in 1974, James Dines, another investment newsletter publisher, took out an ad proclaiming “THE DINES LETTER HAS NEVER BEEN SO BEARISH.” Dines claimed, “We’re gonna have a full-scale collapse within the next six months. There may be violence in the streets.” Over the next year the Dow went much higher, from 600 to 1,000. There was no full-scale collapse.

In 1982, magazine ads from William Finnegan, a computer trading firm in California, made the following promise:

If you happen to know what the Dow Jones Average will be 80 trading days from now, you could make quite an impression on your friends. Not to mention your banker. Well, you can know.

To gain this knowledge about the future price of the Dow, you had to buy a computer program that would then spit out the market outlook for the next 80 days. When the model was initially rolled out, every single day for the next 80 days, Finnegan’s model predicted a market decline. The first day was a prediction of a 7.5% loss. Instead the market was up 1,000 points during those 80 days.

In Granville’s defense, he was more of an entertainer than an actual investment advisor. He even admitted to the Wall Street Journal in 1989, “I observed that when people are entertained, they will retain more information.” Another time Granville observed people retain three times as much information when they’re entertained. There’s a huge difference between prediction and advice, but most people latch onto predictions because they’re sexier. Forecasts may be exciting but they tell you nothing about what the future has in store.

Columnist Franklin Pierce Adams once observed, “Nothing is more responsible for the good old days than a bad memory.” Joe Granville may have had a bearish bent to his predictions because his father had bad memories of the worst crash of all time. His father was a banker who lost it all in the market crash during the Great Depression. Granville once said, “It wasn’t the market that did it. It was Wall Street. If he had followed what I teach, he’d have made $8 million on the Crash.”

This post was adapted from Don’t Fall For It: A Short History of Financial Scams.

 
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